Environmental Influences on the Food Industry: McDonald's & Cadbury

This essay examines the environmental influences on the food industry, focusing on the strategies of McDonald's and Cadbury. It explores how macro-environmental factors, such as political, economic, socio-cultural, technological, environmental, and legal forces (PESTEL), impact McDonald's. The essay also delves into the micro-environmental factors affecting Cadbury, utilizing Porter's Five Forces to analyze competitive dynamics, including the threat of new entrants, substitutes, supplier power, buyer power, and rivalry among competitors. The analysis highlights the challenges and opportunities presented by these environmental factors, emphasizing the importance of adapting to consumer preferences, economic conditions, and technological advancements. The essay concludes by determining which factor is more influential in the food industry, emphasizing the evolving nature of the industry and the need for businesses to adapt to thrive in a competitive landscape.

Environmental Influences on the Food Industry
EC4005- The Fundamentals of Economics
University of Central Lancashire, Cyprus
School of Business and Management
MBA Course 2020-21
04/12/2020
Words: 2153
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A market was originally a gathering place where people could buy and sell produce, and t
his form of market still exists today. A market is much more challenging in contemporary culture
s, but maintains the basic values of putting together buyers and sellers with shared interests. This
modern market model is focused on clusters of individuals with common needs and preferences,
as well as firms who seek to meet the needs of customers and want to do better than their rivals.
Consumers must make purchase decisions dependent on their own wealth or purchasing power.
As marketing is an outward-looking corporate philosophy, marketers in the hospitality industry
need to adapt to the changes of the environment. The marketing of a hospitality organization is
driven by both micro- and macro-environmental variables. In the economy itself the climate is th
e macro-environment. It has an effect on how all corporate units concurrently work, execute, ma
ke decisions, and influence strategies. It is very complex, which means that an organization need
s to monitor the improvements continuously. It consists of external forces that do not influence, b
ut are undoubtedly influenced by the organization itself.
Whereas, the micro-environment is ultimately the environment that has a direct effect on the
business. It is connected to the geographic area where the company runs and will have impact on
the business processes directly. It has the potential to impact the company’s regular proceedings
and general results.
The presence of a smart and cautious goals defines competitive advantage. As a way to
reach economies of scale, corporate enterprises need to have clear plans that exploit their core
strengths. The organization’s corporate plan should be focused on organizational efficiencies.
Moreover, efficient companies aim to create an ecosystem where through complex business
structures and operations, they are able to meet their vital goal. Companies need to have the
capacity to execute plans that will take advantage of emerging opportunities efficiently.
Furthermore, they must be able to react in an efficient and productive way to complex situations.
This essay describes the role that influences change in the macro- environment which plays
in MacDonald’s competitive strategy, and the role of micro-environment that plays in Cadbury.
Concluding the essay by determining which factor is more influential.
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The macro-environment refers to how its output is affected by the macroeconomic
circumstances under which a business or sector exists. In comparison to individual sectors and
economies, microeconomics deals with gross production, spending, and the level of prices in an
economy. The macro-environment includes political, economic, socio-cultural, technological, en
vironmental, and legal forces, and are also known as the PESTEL environment. Hospitality
businesses have little control over PESTEL factors, if any; but major shifts in any one aspect
may have a significant effect on the business. Factors are continually evolving, impacting
customers, driving market demand, and shaping the business landscape through these changes. In
the external environment, such as PESTEL McDonald’s corporation strategies addresses the
issue.
In over a hundred nations, McDonald’s must respond to political laws and pressures. They
must stick to health and hygiene regulations, like any other restaurant. Owing to the excessive
levels of sodium and sugar, which induces many chronic health conditions such as type 2
diabetes, asthma, and heart diseases, fast food shops are pressured by the government. In
addition, McDonald’s is also impacted by the government tensions between nations. It is an Ame
rican company even though they have restaurants all over the world, current trade agreements
could be shifted by complications between government parties, creating a hostile environment
for McDonald’s to function overseas.
Economic factors play a major role in the success of any business. McDonald’s is an
incentive for the slow but steady economic development of developing countries to expand and
improve the stability of its chain sector. The U.S. sector appears to be the primary contributor to
the sales of the group, but the company still profits from the stable turnover and expansion of
European economies. On the other hand, the stagnation of the Chinese economy is deemed as a
threat. This external factor is a competitive concern since a big contributor to McDonald’s sales
is the Chinese sector. Nevertheless by expansion in a high-growing emerging market, such as in
Asia, the business has the chance to expand. In this aspect od McDonald’s PESTEL research,
global economic conditions specifically offer market development opportunities.
To evaluate the success of every company, social variables are important to remember. There
are too many social influences that have a significant influence on the success of a brand, such as
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social patterns, behavioral changes, and many other factors. In particular, customers; shifting
preferences and lifestyle changes will push sales up or down. Customers are extremely driven to
health consciousness. Brands like McDonald’s are expected to have a menu that matches their
preferences. In the last decade, the focus of society has been on low-calorie diets due to rising
obesity around the world. In addition, McDonald’s should target the right industries in the
society.
Technological factors that play a major role in increasing profits for any business. McDonal
d’s has recently updated their menus with TV displays suspended behind their cashiers. To
highlight nutritious facts, they also use their website. As a way to rebranding their image, they
have also remodeled their stores. To motivate more clients to order and stay, they have free
WIFI. McDonald’s are active on social media such as Facebook and Instagram where they post
ads to attract customers attention with new offers.
As one of the largest consumers of beef, potatoes and chicken in the country, McDonalds h
as long been skeptical of environmentalism in the world. This is because high intake of beef by
methane gasses coming from the cow’s ranch triggers the greenhouse effect. Large scale
cultivation impacts the ecosystem and loses the opening of green forests for plantation
operations. Our planet is becoming serious with environmental concerns, and companies should
take into consideration not only for benefits but for the global capital of economic growth and of
environmental protection and health care for the future generation.
In certain workplace and schools, health laws enforce restrictions on the accessibility and
affordability of fast food. McDonald’s sales from these business segments are challenged by this
legal trend. Animal care laws are on the other hand, categorized as a hazard and an incentive. For
starters, in the supply chain of McDonald’s these regulations raise costs. However, by
introducing a robust animal welfare program, the same external factor provides an incentive to
develop the business and will draw more clients who are involved in animal welfare. Overall, in
this component of the PESTEL study, the legitimate external variables face serious challenges to
the McDonald’s strategies.
In order to succeed effectively in a market, companies must consider the
microenvironment. All companies are part of an industry—a group of firms all making similar pr
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oducts or offering similar services. As we will address shortly, companies in a sector may or may
not compete directly against each other but they both face common circumstances in terms of
consumer interests, supply ties, and development or downturn in the industry. It is important to
evaluate the competitive market in which they work in order to recommend what approach is
needed for a business to adopt. The factors that should be weighed when evaluating Cadbury’s
business landscape are both factors from the confectionery industry and from the
microenvironment, which will have an effect on the company’s successful activity. To analyze
the microenvironment of an organization, Harvard strategy professor Michael Porter created an
analysis method. In order to explain the influence each group has an organization in a sector,
Porter’s Five Forces is a tool used to analyze numerous micro-environmental entities. Each of th
e forces reflects an element of rivalry that affects the ability of a business to compete in its
market.
Threat of New Entrants and Barriers to Entry
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Cadbury has been positioned their company as the biggest and most spreading emerging mar
kets firm among its rivals. It would be difficult for new entrants to compete because Cadbury is
already well-established within its market place. In addition, the barrier to entry makes it very
difficult for another new business to launch in this food industry which will need large initial
capital or investment to develop its own firm. The only challenge that might stand in the way is
seeking a viable location for Cadbury. They need to ensure that they conform with the laws of ev
ery nation and bear in mind the international policies for proper functioning.
Threat of Substitutes
There are various substitutes that cross market chocolate products. Threat of substitutes for
chocolate goods in the confectionery business is high. Furthermore, other substitutes that can be t
hreatening the chocolate business including non-chocolate snacks such as biscuits, crisps, frozen
dairy products, savoury snacks. As indulgent threats are focused solely on consumer desire, these
snacks pose a hazard. If the demand for Cadbury chocolate grows, the biggest threat to this
company’s alternatives is that every other confectionery brand is the supermarket’s own brands
prefer to imitate famous chocolate such as Nestle and Kit Kat, which at a cheaper price have
their own brand on the shelf. In addition, identifying a good position and collecting the criteria
for smooth entry and foreign policy that could affect its operation is the only challenge that could
affect the development of Cadbury.
Supplier Power
Suppliers can exert power by boosting cost or reducing the chocolate company’s efficiency. B
usinesses will allow vendors to deliver services and goods on schedule and be as effective as
possible, while communicating well with suppliers. Through establishing and maintaining strong
relationships with its vendors all over the world, Cadbury prides itself on its own goods. It has a
broad buying capacity and a commodity that is far from special is sold by the manufactures of
agricultural goods and thus Cadbury has more negotiation power than its suppliers as the
company depends heavily on a diverse supply chain of agribusiness.
Power of Buyer
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Nowadays, owing to the strong competition in the confectionery industry, consumer have
many options to fulfill their opinions and desires. Cadbury’s have immense purchasing power
whose customers are scattered across the globe and they are in billions which makes this
business one of the world’s leading manufacturers of confectionery. The price subjectivity of the
products is not a problem for the people, but the increasing number of rivals who sell the same
type of products on the shelf at a lower cost may cause changes in consumer loyalty. Cadbury m
ust also be extremely cautious in setting costs and keeping the consumer happy with its own
product.
Intensity of Rivalry Among Competitors
Although it has partially differentiated goods, the confectionery market is crowded with
many competitors. Some are well established players who has similarly solid brands such as Nest
le, Mars, Hershey, and Ferrero Rocher. These companies are Cadbury’s main competitors since t
hey are long established confectionery brands that are introducing innovative product lines, and
imposing new promotion same as Cadbury. The level of competition among rivals is strong.
This sector has multiple rivals, balances similarly, slowing expansion, has high storage and fixed
costs, as well as high exit barriers. All of these conditionsin the confectionery industry generate
price wars, promotional struggles, innovative product lines and better customer care efficiency.
In conclusion the food industry as a whole is a flourishing sector around the globe.
Conversely, health concerns are affecting this sector the most. The fast food shops such as
McDonald’s is trying to add new items in the menu that are healthier, greener and natural
products. The increased competition in the food industry such as chocolate is a great matter of
concern for Cadbury. As it is easier to establish a fast food shop, the completion has increased
significantly, and companies now have to try much harder to maintain their existing customers
and to attract new ones. Any company’s performance relies heavily on micro and macro
environmental factors. For any decision making, any strategic marketer should have an in-depth
consideration of these factors. These aspects will improve the success rates of marketing
campaigns for any company and increase the brand’s popularity in the long run.
In the food industry macro environment is very beneficial since it constitutes those outside
forces that are not under the control of the firm, but it impacts the industry’s functioning.
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Whereas the image of the food industry relies on the microenvironment since it impacts the
company and its ability to serve customers. In fast food shops hospitality is a main service to
provide a customer. In the microenvironment, clients are the most significant factor. The target
priority for the value distribution network is customers. Creating a strong relationship with their
clients is crucial for an industry. When selling a product, microenvironment factors and
macroenvironment factors must both be addressed. The product may not meet its commercial
potential or even make it to the market if all these considerations are not taken into account.
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